Journal Article

The Decline in German Output Volatility: A Bayesian Analysis

Empirical Economics

Using Bayesian methods, we analyze whether a volatility reduction as sharp as documented

for growth of U.S. gross domestic product (GDP) in the mid-1980ies can also be detected for

German GDP growth. Our analysis, based on different time series models allowing for alterna-

tive characterizations of output stabilization, provides across all models empirical evidence for a

decline in the output volatility around 1993. Furthermore, we assess competing explanations for

reduced output volatility. The results suggest that the main source for the volatility reduction is

an ongoing structural shift accelerated by the German reunification and accompanied by changes

in the correlation structure between individual GDP components.

Authors

Christian Aßmann
Roman Liesenfeld

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Publication Date
JEL Classification
C15, C22, C52